Legislators who hold the state’s purse strings are taking a wait-and-see approach to the idea of extending a 0.5 percent Oahu surcharge on the state general excise tax beyond 2022 to help pay for Honolulu’s rail transit system.
Rail officials Thursday told the Honolulu Authority for Rapid Transportation board they expect the state’s largest public works project ever to cost between $550 million and $700 million more than the $5.26 billion estimated.
HART Executive Director Daniel Grabauskas cited several reasons: Project delays, including two caused by lawsuits filed by rail opponents, pushed the cost by as much as $190 million; with 40 percent of construction work yet to be contracted, bids on various phases are coming in far more expensive than budgeted as the construction trade has picked up; and meanwhile, the city has received $41 million less than had been projected from GET surcharge revenues.
Grabauskas and other HART officials suggested several ways of addressing the anticipated shortfall, including extending the GET surcharge beyond its 2022 expiration date, possibly permanently.
That suggestion touched off a furor among critics and skeptics of the rail project, who said it was inevitable that the price tag would jump.
But Senate Ways and Means Chairwoman Jill Tokuda and House Finance Chairwoman Sylvia Luke on Friday said they want city officials to paint a clearer picture of why they need more money and why they have to make such a critical decision seven years before the sunset date of the surcharge.
Since the Legislature agreed to the surcharge in 2006, HART and the Honolulu City Council have controlled how the rail project should be financed, Luke said. "The state Legislature has been completely out of the picture (on) the rail discussion," she said.
If HART officials want an extension, it’s up to them "to educate the legislators and state officials now about what’s going on, what are some of the problems," she said.
Luke (D, Punchbowl-Pauoa-Nuuanu) said she expects the discussion to take place during hearings in the transportation and money committees before lawmakers have enough information to make intelligent choices.
Tokuda (D, Kailua-Kaneohe) said she expects city officials to give a preview of their request at a joint informational budget briefing before the Finance and Ways and Means committees in mid-January, when the City and County of Honolulu and the other three counties typically outline their top legislative priorities for the session.
Like Luke, Tokuda said both lawmakers and the public need to learn the fine details of what led to a $550 million to $700 million gap in the rail construction budget.
One key question is why a decision to extend the surcharge needs to be done in the 2015 Legislature and not closer to the 2022 sunset date when there will be a truer picture of the actual project cost, she said.
"I think there needs to be a better explanation," Tokuda said. "Are there certain factors that come into play that make it so important to lift that sunset now? Financing, bonding? What’s the urgency and impetus to make that very big policy decision now?"
City Council Transportation Chairman Joey Manahan said he thinks the discussion on how to meet the shortfall needs to take place now so the city can have more certainty about how it will be funded. Extending the surcharge and giving HART the authority to issue bonds, under a revolving fund, to help finance construction costs are preferable to diverting federal transit dollars typically earmarked for the city’s bus system to pay for rail.
Mayor Kirk Caldwell told reporters Thursday his administration opposes using the so-called "5307" federal Urbanized Area Formula Program funds, normally used for buses, for rail although it is included in the rail project’s financial plan as insurance.
State Rep. Gene Ward (R, Kalama Valley-Queen’s Gate-Hawaii Kai), a rail critic, said Honolulu officials are reneging on their agreement with state lawmakers and taxpayers to keep the tax going only through 2022.
"I think it’s a broken promise, is a simple way of putting it," Ward said. He and others are reluctant to vote for any tax increase, and city officials should simply find a way to work the rail project so they can "live within their means."
Ward said he wants the city to consider the idea of putting commuters into driverless cars, which they would share with others, that would operate along HOV lanes.
Council Budget Chairwoman Ann Kobayashi said she’s not surprised by the revised cost numbers and believes the price tag will only escalate the closer the project moves into older, more developed areas of urban Honolulu.
Kobayashi said it may be time for HART officials to seriously consider scrapping plans for rail and instead allow buses, instead of trains, to travel exclusively along the 20-mile guideway from East Kapolei to Ala Moana Center.
Such a plan would eliminate the need for rail cars and tracks, and allow more commuters from outside the guideway, such as Waianae, Makakilo, Ewa Beach, Mililani and Wahiawa, to take advantage of a dedicated route without ever needing to get off their buses, she said.
"Maybe that might be cheaper," Kobayashi said. "And then we wouldn’t have to have park-and-rides."
In response to a Honolulu Star-Advertiser query, Grabauskas said in an email that it’s too late to entertain that idea.
Under the city’s full funding agreement with the Federal Transit Administration, "we are not allowed to change our plans mid-stream from a rail transit system to one using buses," Grabauskas said. "To switch from steel-on-steel rail technology to buses using rubber tires, we would have to return the existing federal funding and reapply for the money."
Such a bus-only guideway, from a design standpoint, would require multiple ramps for buses to enter and exit the line, he said, which would cause traffic on surface streets below them.
Meantime, rail officials Friday put a group of three stations in West Oahu out to bid for construction. Those three stations — West Loch, Waipahu Transit Center and Leeward Community College — had actually gone out to bid last year as part of a larger, nine-station package. However, when all of the bids for that larger scope of work exceeded the rail agency’s budget by at least $100 million, HART canceled the bids.
Rail officials have opted instead to divide that original nine-station package into smaller, three-station groups. In doing so, HART hopes to attract more bidders and better prices.
Local construction firm Nan Inc., the lowest bidder on the nine-station package, dropped its protest earlier this fall against HART’s decision to cancel the bids. In Nan’s original protest letter, the company’s president called it "ludicrous" that breaking up the work into smaller pieces would yield any significant savings.
The bids on this first, smaller group of stations are expected to be opened in February or early March. Rail officials said this week that they expect to know whether their attempts at cost savings are really working when bids on the last two groups of stations come in later next year.
